When you say the word subdivision to most people, it will most-likely conjure up images of large tracts of suburban style housing. And while huge housing developments are one type of subdivision, there are also much simpler forms that even the novice real estate investor could contemplate doing. Knowing what a subdivision is and how to potentially go about doing one could be a profitable tool for any real estate investor.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
What is a Subdivision?
Subdivisions are rather simple when you get right down to it. A subdivision is taking of one tract or piece of land and dividing it into two or more tracts of land. A subdivision could involve tracts of land that range in size from hundreds of square feet to hundreds of acres. A subdivision can also only involve only one or hundreds of new tracts.
Legally, however, the definition of a subdivision is going to vary from state to state and from location to location. These legal definitions are important, because they will also define the rules that one must follow to legally complete a subdivision. There is no standard legal subdivision across the United States. If you are thinking of subdividing land, you are going to have to look into your local rules to find out what that definition entails.
For example, here in Tennessee, any division of land over five acres is not considered a subdivision — unless you are in Shelby County where the standard drops to four acres — or if you are installing roads or utilities then size will not matter.
As you can see, it can get complicated quick, so it is best to ask what your local rules are. In general, if you are creating small lots and building a road or installing utilities, you will fall under the legal definition of a subdivision.
The main reason people subdivide their land is to sell off a portion of it. You may, for example, want to sell a part of your land to a family member so they can live close by. Or you may want to create lots to build new a housing or commercial development. Whatever the reason, subdivisions create new tracts of land. That is why people subdivide.
How to Subdivide
No matter where you are, the beginning of any subdivision process is going to begin with a description of the land being subdivided. I do not mean an illustrative description. I mean a legal property description. A description that legally defines what the property boundaries are. This is so you legally know what it is you are trying to divide. Look at any deed and it will have a legal description on it. Every piece of land in every corner of America has a legal description recorded somewhere. Most can be found down at the local courthouse. It is with this description that you begin any subdivision process.
Next, check your local regulations. There are two things you want to check. One is zoning, and the other is subdivision regulations. Your area may or may not have these regulations, or they may be called something completely different. No matter what they are called, these regulations are specifically designed to regulate the subdivision of land.
If you find that no regulations exist, as may be the case in many rural areas, you can simply write up a legal description of the area you wish to subdivide — often using the legal description described above, place that description on a deed and have it recorded at your local courthouse. That is it, subdivision complete.
If, as in many urban areas and towns, there are zoning and subdivision regulations, then you have to follow their provisions in addition to drawing up a deed.
Check the zoning first. The most important thing to look for in a zoning ordinance is the minimum lot size. If the land you want to subdivide is zoned for one acre minimum lots, you are not going to be able to subdivide into 10,000-square-foot lots. To do so necessitates a rezoning, and that is a deferent game entirely that is discussed here.
If you find the zoning will permit you to do what you want to do then you need to turn to the subdivision regulations. These regulations as you may have guessed will spell out the legal requirements to subdivide your land. These regulations must be followed before any land can be divided and sold. Sales can be voided if the regulations are not followed.
Most likely you will have to develop what is called a plat. A plat is a map of your subdivision, drawn to scale by a surveyor or engineer. It will show how the various lots or tracts you propose, along with any streets and utilities, meet the requirements of the local jurisdiction.
This plat is often reviewed and approved by local planning staff and an appointed planning commission. Once your plat is approved and recorded at the local courthouse, then you can write deeds and sell of the new tracts. The whole process can take anywhere from a few weeks to years depending on the jurisdiction, their regulations and the complexity of your subdivision.
This is a very basic description, and a subdivision can get very complicated very quickly. Remember to check with your local planning commission or building department. Simple two lot divisions can often be handled quickly and easily, but building roads or trying to make dozens of lots will require a lot of professional and technical help.
I spent years making the rules and reviewing these types of things.
So if you have specific questions about the subdivision process, ask in the comments below!